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The first jointly-run casino
by Paul Ojanen, special to Minnesota Public Radio
February 24, 2005

The Fond-du-Luth Casino in downtown Duluth was the state's first jointly run gambling operation. (MPR Photo/Paul Ojanen)

Governor Pawlenty wants Minnesota's Indian tribes to share their profits with the state. He has also spoken with three northern tribes about building a metro area casino that would share revenues. Tribes are not obligated to share their profits, but one tribe already has just such an arrangement. The Fond du Lac tribe hands over some of its profits to the city of Duluth. The state's first jointly-run casino has worked well, according to some, but it will never be a model for arrangements in the future.

Duluth, Minn. —
The Fond-du-Luth Casino in Duluth is a unique arrangement. It was the first off-reservation casino in the country, and it shares 19 percent of its video slot revenue with the city of Duluth. Former Fond du Lac tribal chair Sonny Peacock says the casino started in the 1980s as a high stakes bingo hall.

"What we did, is we got together with the city of Duluth and negotiated the purchase of a building," Peacock said, "and turning the property into trust, which meant it would be turned into reservation."

The casino takes up two floors of an old Sears department store. There are rows of video slot machines, with only a few black jack tables.

It's been a good deal for the city of Duluth. Every year, the casino gives the city 19 percent of the take from slot machines. In 2004, that was more than $5 million.

What we did, is we got together with the city of Duluth and negotiated the purchase of a building and turned the property into trust, which meant it would be turned into reservation.

- Sonny Peacock

Duluth City Councilor Russ Stewart, says the money is placed in an account, which has now grown to more than $50 million.

"Interest from that fund is used to pay for public improvements," said Stewart. "So it's been very beneficial to the citizens of Duluth to have this ongoing, ever-growing endowment that is used to repair our streets that, would otherwise be paid for with ongoing taxation."

The Fond-du-Luth Casino began before there was any federal legislation governing Indian gambling. The Indian Gaming Regulatory Act of 1988, defines how tribes can operate casinos. States have no regulatory authority over tribes. But tribes can voluntarily agree to share revenue.

That's what happened at Fond-du-Luth, and it may happen again if three northern tribes reach an agreement with the state. The Red Lake, White Earth and Leech Lake reservations have been talking with Governor Pawlenty about building a casino in the Twin Cities.

Sonny Peacock, Fond du Lac's former tribal chair, helped start the Fond-du-Luth casino. Peacock's now president of White Earth Tribal College and says the White Earth reservation needs economic development. It is the largest reservation in Minnesota, with 21,000 tribal members.

"White Earth, with one casino right now, will not meet the needs of its people in the immediate future," said Peacock. "Because it's so big and has so many needs, it has to look at diversifying and look at making the best deal it can for its people and its future."

Some native leaders question the governor's motives. Henry Buffalo, an attorney who helped write the Indian Gaming Regulatory Act and who works for the Prairie Island casino, says the governor's claim of helping the Indians is just a ploy to make his plan to expand gambling more politically palatable.

"The problem that those three tribes have are not problems created last year or two years ago," said Buffalo. "They're problems that have been around forever. And for the governor all of a sudden to wake up this year and say, 'Oh, by the way, we're gonna help the Indians now?' I mean, they've been poor for a long time."

There are no guarantees. Off-reservation casinos are controversial and if the state and the tribes reach an agreement for a tribally run casino, it would still have to be approved by the Bureau of Indian Affairs.

Only three off-reservation casinos in the country have ever been approved. Fond-du-Luth started long before other gambling in Minnesota and this gave it a head start. Now that gambling is under such intense scrutiny, it's not clear whether a new off-reservation casino project would get approval.

The governor's office says the new casino would not be tribally-run. They say it would be run by the Minnesota Lottery, and would not need any federal approval.